Accelerating our IPT strategy - GlaxoSmithKline plc and Pfizer Inc to form new world-leading Consumer Healthcare Joint Venture Transaction lays ...

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Accelerating our IPT strategy - GlaxoSmithKline plc and Pfizer Inc to form new world-leading Consumer Healthcare Joint Venture Transaction lays ...
Accelerating our IPT strategy
GlaxoSmithKline plc and Pfizer Inc to form new world-leading
Consumer Healthcare Joint Venture

Transaction lays foundation for separation of GSK to create two new
UK-based global companies
Accelerating our IPT strategy - GlaxoSmithKline plc and Pfizer Inc to form new world-leading Consumer Healthcare Joint Venture Transaction lays ...
Information regarding forward-looking statements and
non IFRS measures
This presentation may contain forward-looking statements. Forward-looking statements give the Group’s current expectations or forecasts of future events.
An investor can identify these statements by the fact that they do not relate strictly to historical or current facts. They u se words such as ‘anticipate’,
‘estimate’, ‘expect’, ‘intend’, ‘will’, ‘project’, ‘plan’, ‘believe’, ‘target’ and other words and terms of similar meaning i n connection with any discussion of future
operating or financial performance. In particular, these include statements relating to future actions, prospective products or product approvals, future
performance or results of current and anticipated products, sales efforts, expenses, the outcome of contingencies such as leg al proceedings, and financial
results.
Other than in accordance with its legal or regulatory obligations (including under the Market Abuse Regulations, UK Listing R ules and the Disclosure
Guidance and Transparency Rules of the Financial Conduct Authority), the Group undertakes no obligation to update any forward -looking statements,
whether as a result of new information, future events or otherwise. Investors should, however, consult any additional disclos ures that the Group may make
in any documents which it publishes and/or files with the US Securities and Exchange Commission (SEC). All investors, whereve r located, should take note
of these disclosures. Accordingly, no assurance can be given that any particular expectation will be met and investors are ca utioned not to place undue
reliance on the forward-looking statements.
Forward-looking statements are subject to assumptions, inherent risks and uncertainties, many of which relate to factors that ar e beyond the Group’s control
or precise estimate. The Group cautions investors that a number of important factors, including those in this presentation, c ould cause actual results to differ
materially from those expressed or implied in any forward-looking statement. Such factors include, but are not limited to, those discussed under Item 3.D
‘Risk factors’ in the Group’s Annual Report on Form 20-F for FY 2017. Any forward-looking statements made by or on behalf of the Group speak only as of
the date they are made and are based upon the knowledge and information available to the Directors on the date of this presen tation.
A number of adjusted measures are used to report the performance of our business, which are non IFRS measures. These measures are defined and
reconciliations to the nearest IFRS measure are available in our third quarter 2018 earnings release and Annual Report on For m 20-F for FY 2017.
All expectations and targets regarding future performance should be read together with “Assumptions related to 2018 guidance and 2016-2020 outlook” on
page 38 of our third quarter 2018 earnings release.
No statement in this presentation is intended as a profit forecast or profit estimate and no statement in this presentation s hould be interpreted to mean that
the earnings per share of the Group, as altered by the transaction will necessarily match or exceed the historical or published earnings per share of the                  2
Group or the relevant entities which form the basis for the transaction.
Accelerating our IPT strategy - GlaxoSmithKline plc and Pfizer Inc to form new world-leading Consumer Healthcare Joint Venture Transaction lays ...
Agenda
–x

     Strategic Overview    Emma Walmsley,
                           Chief Executive Officer

     A new world-leading   Brian McNamara,
     Consumer Healthcare   Chief Executive Officer,
     Joint Venture         GSK Consumer Healthcare

                           Simon Dingemans,
     Transaction details   Chief Financial Officer

                                                      3
Accelerating our IPT strategy - GlaxoSmithKline plc and Pfizer Inc to form new world-leading Consumer Healthcare Joint Venture Transaction lays ...
3 long-term priorities for sustainable growth

  Innovation           Performance              Trust

                                                        4
Accelerating our IPT strategy - GlaxoSmithKline plc and Pfizer Inc to form new world-leading Consumer Healthcare Joint Venture Transaction lays ...
Platform for improved operating performance and
reshaped portfolio

                      New leadership and     R&D programme
                      culture                prioritisation
Innovation
                      Focus on launch
                                             Business Development
                      execution
Performance
                      Restructuring Pharma   Buy out of the Novartis
                      business               stake in Consumer JV

Trust                                        Divestment of non-core
                      New R&D approach
                                             assets

                                                                       5
Accelerating our IPT strategy - GlaxoSmithKline plc and Pfizer Inc to form new world-leading Consumer Healthcare Joint Venture Transaction lays ...
Creation of a new world-leading Consumer Healthcare
Joint Venture

All equity transaction
                  All-equity transaction                                                                                                Separation
– GSK 68%; Pfizer 32%
                                                                                                                                        – Intention to separate
– Sales of approximately £9.8 billion ($12.7 billion)* and cost synergy                                                                   Joint Venture via
  opportunity of £0.5 billion                                                                                                             demerger
– Expected to be accretive to Total earnings in the second full year                                                                    – Estimated timing
  post close                                                                                                                              within 3 years post
– Expected to be accretive to Adjusted earnings and free cashflow in                                                                      close, once integration
  the first full year post close                                                                                                          is substantially
                    GSK expects to pay 80p dividend per share                                                                             complete and with the
                           for each of 2018 and 2019                                                                                      continued progress we
                                                                                                                                          expect to make on
                    Shareholder and anti-trust approval required                                                                          strengthening our
                         Expect to close second half 2019                                                                                 Pharma pipeline
 *Based on 2017 reported results. £GBP figure includes: Pfizer 2017 revenues reported under US GAAP translated at 1.30 $:£ and GSK JV sales reported under IFRS and
                                                                                                                                                                             6
 adjusted for perimeter changes that GSK will make to the business it contributes to the new Joint Venture. Figure excludes an y impact from potential future divestments.
Accelerating our IPT strategy - GlaxoSmithKline plc and Pfizer Inc to form new world-leading Consumer Healthcare Joint Venture Transaction lays ...
Improved performance and increased value for
shareholders

                                   • Creates new world leader in
                                     Consumer Healthcare

                                   • Offers significant
                                     opportunities for both cost
                                     synergies and growth

                                   • Separation creates a new
                                     global company and
                                     investment proposition
                                                                   7
Accelerating our IPT strategy - GlaxoSmithKline plc and Pfizer Inc to form new world-leading Consumer Healthcare Joint Venture Transaction lays ...
Supports our priority of strengthening Pharma

       Expected to be                                                       Visibility of separation                                                  New capital structure
    accretive to earnings                                                      supports capital                                                      post separation to fund
       and cashflows                                                                 planning                                                              investment

      Vaccines

           HIV                                                                                                                           DTG+3TC             CAB+RPV               fostemsavir

   Respiratory

                                                                                                                 GSK’916                                          TSR-042
     Oncology                                                                                                    (BCMA)                                           (PD-1)

                                                                                       GSK’863 - daprodustat                      GSK’165                    GSK’955 - gepotidacin
Other pipeline                                               + rituximab
                                                                                             (HIF-PFI)                            (aGM-CSF)                  (topoisomerase IV inh.)
                                                                                                                                                                                                           8
Includes current growth drivers and late stage pipeline assets with positive Ph2 data in hand; Zejula and TSR-042 are Tesaro assets – transaction expected to close Q1 2019 pending regulatory approvals
Accelerating our IPT strategy - GlaxoSmithKline plc and Pfizer Inc to form new world-leading Consumer Healthcare Joint Venture Transaction lays ...
Clear pathway for creation of two new UK-based global
companies

                                                         New global
                     Continue to strengthen R&D     Pharmaceuticals and
Innovation           pharma pipeline                Vaccines company with
                                                   R&D focused on science of the
                                                   immune system, genetics and
                                                      advanced technologies
                     Integrate two highly
Performance          complementary CH businesses
                     and realise synergies
                                                      New world-leading
                                                    Consumer Healthcare
                     Demerge and equip each          company with category
Trust                company with appropriate        leading power brands and
                                                      science based innovation
                     capital structure

                                                                                   9
Accelerating our IPT strategy - GlaxoSmithKline plc and Pfizer Inc to form new world-leading Consumer Healthcare Joint Venture Transaction lays ...
Brian McNamara

Chief Executive Officer, GSK Consumer Healthcare
Positive consumer healthcare industry trends

  Increasing health awareness
  and self care                                                  Ageing population
           1
  77% of consumers want to take                                                 2

  more control over decisions
                                                                 1.4 billion aged 60+ by 2030,
  about their health                                             an increase of 0.5 billion vs 2015

  Emerging middle class                                          Innovation

                                   3
  Almost 2.4 billion more                                        Unmet consumer
  emerging middle class                                          needs (switches, products,
  consumers by 2030 vs 2015
                                                                 formats, channels, devices)

1. IPSOS Trend Survey 2017 2. UN DESA 3. Brookings Institution                                        11
Creation of a global leader in consumer healthcare
With scale and strong capabilities

                                                                                                                           Strong geographic footprint
 Combined sales of                                                                                                         • #1 in US, #2 in China3
 approximately £9.8bn1                                                                                                     • 29% of sales in Emerging
                                                                                                                             Markets1

 #1 in OTC
 • Leadership positions in Pain                                                                                             Proven integration capability
   Relief, Respiratory and VMS3

 #1 position in Therapeutic                                                                                                Value creation
 Oral Health2                                                                                                              • £0.5bn cost synergy potential

1. Based on 2017 reported results. £GBP figure includes: Pfizer 2017 revenues reported under US GAAP translated at 1.30 $:£ and GSK JV sales reported under IFRS and
adjusted for perimeter changes that GSK will make to the business it contributes to the Joint Venture. Figure excludes any impact from potential future divestments.   12
2. GSK analysis based on Nielsen, IRI and Euromonitor data; 3. Nicholas Hall’s DB6 Global OTC Database, 2017
Pfizer has a strong portfolio of category leading brands
 Top 10 brands account for 80% of global sales

       Pain Relief                             VMS                   Respiratory     Digestive Health    Skin Health

                                                                                                         Strong portfolio
    Advil #1 in US and                 #1 in global OTC               #8 in global    Nexium #1 in US         in OTC
     global pain relief                  VMS category                 respiratory     indigestion and    dermatologicals
         category                                                      category       heartburn relief      category
                                                                                         category         #1 in lip care
                                                                                                             globally

                                                                                                                            13
Sources: Nicholas Hall’s DB6 Global OTC Database, 2017 US IRI Data
Category leading positions of combined portfolio

                                                                                                #2                           #1
        #1                             #1                       #1                                                                                        #3
                                                                                             Digestive                  Therapeutic
   Pain Relief1                       VMS1                  Respiratory1                                                                             Skin Health1
                                                                                              Health1                   Oral Health2

           – vv                                                                                                                  – x

                                                                                                                                                                              14
1. Nicholas Hall’s DB6 Global OTC Database, 2017. For Skin Health, share and ranking based on OTC dermscategory. 2. GSK analysis based on Nielsen, IRI and Euromonitor data
Creates OTC leadership positions in key geographies
Leadership OTC positions in some of the world’s most important markets:
US #1, Germany #1, India #1 , Russia #2, China #2

                                                                                   Central & Eastern
                                                    Western Europe #1                 Europe #2
                                                         7.5% MS                       5.8% MS

              USA #1
              10.5% MS                                        Middle East Africa
                                                                        #1
                                                                   5.4% MS                              Asia
                                                                                                         #1
                                                                                                       4.9% MS

                           Latin America #2
                                 7.8% MS

Source: Nicholas Hall’s DB6 Global OTC Database, 2017                                                            15
Note: Middle East Africa region also includes RoW
Proven integration capability through GSK-Novartis joint
venture

                                                                  Delivered average annual sales growth of ~4%
                                                                  through integration1

                                                                  Over-delivered on cost synergy targets of £400m

                                                                  Improved operating margin 470bps 2015-20172

                                                                  Built more efficient, scalable organisation model

                                                                  Leveraged both companies to upgrade capabilities

1. Average annual revenue growth over the 2015 -2017 period at 2015 constant exchange rates                           16
2. At constant 2015 exchange rates. At actual exchange rates, margin improvement was 640bps
Leverage strengths of both companies to deliver
sustained profitable growth

                            • External innovation
       Innovation           • Strong track record of delivery
                            • Scientific excellence, Rx/OTC switch expertise

                            • Digital transformation
      Performance           • Strong sales, retail and expert capabilities
                            • Global marketing/category model

                            • Strong quality/compliance culture
         Trust              • Strong track record of supply chain efficiencies and
                              customer service

                                                                                     17
Deliver an industry leading margin

                                                                                                                   New guidance for new JV
                                                                                                                   Mid to high 20s%
                                                                                                                   by 2022 1

                                                                                                                   Guidance for existing GSK
                                                                     • Power brand mix                             Consumer Healthcare
                                                                     • Cost & cash discipline                      Approaching mid 20s%
                                                    20.3%                                                          by 2022 1
                                                                     • Strategic resource allocation
                                    17.7%                            • Supply chain efficiency

                     15.5%
                     15.5%
                                                                                    +
                                                                     • £0.5bn synergies
                                                                     • Up to 25% reinvested
       11.3%

       FY 2015      FY 2016        FY 2017         9m 2018                                                  2022

 1At2017 constant exchange rates. Expected 20%+ operating margin by 2020 at 2015 constant exchange rates.                                      18
 Historical margins shown for the GSK Consumer Healthcare segment are at respective actual rates
Simon Dingemans
Chief Financial Officer
Proposed transaction: financial details

             Proposed all equity transaction
New entity   GSK will have a controlling equity interest of 68% and Pfizer 32%

             Expect transaction to close in the second half of 2019, pending shareholder and anti-trust approvals
Timing       Separation of Consumer JV expected within 3 years from closing

             Integration synergies expected to generate total annual cost savings of £0.5 billion 1 by 2022 for
             expected cash costs of £0.9 billion1 and non cash costs of £0.3 billion1
Financial    Targeting a JV adjusted operating margin in mid-to-high 20s percentage range by 20221
impact       Expected to be accretive to Total earnings in second full year post close, reflecting timing of upfront
             costs for implementation of integration versus timing of synergy benefits
             Expected to be accretive to Adjusted earnings and free cashflow in the first full year post close

             No change to current dividend policy

Dividend     GSK expects to pay 80p dividend per share for each of 2018 and 2019
             Transaction enhances GSK’s position to deliver returns to shareholders alongside continued
             investment in our strategic priorities
                                                                                                                       20
             1At   2017 constant exchange rates.
Significant cost synergy potential for the JV, with cash
restructuring costs offset by divestments

                                                                      Total costs £1.2bn1                  Targeting net
                                       Estimated annual
                                                                                                            divestment
    Network rationalisation                synergies                      Cash £0.9bn1                  proceeds of ~£1bn
                                            £0.5 bn1                    Non-cash £0.3bn1                over 2019-20 period1
    Logistics & infrastructure
                                         Estimated phasing
                                         £ billions                  0.5                                           0.5
    Advertising & marketing                                                                    0.4

    Sales & distribution                        0.2                        0.2
                                          0.1                  0.1                   0.1 0.1                 0.1
    Functional support
                                                2019                 2020               2021                2022
                                                            Synergies            Cash costs          Non cash costs
                                                      – z                                                                  21

1   At 2017 constant exchange rates.
Key financials

                                             Standalone financials                                                                           Geographic revenue split
                                                                FY17                                                                                               FY17
                                                           1                              2

                                                                                                                                US          26%                                                     33%
                                                                                                                                                              53%
    Revenues                                   £7.1bn                         £2.7bn
                                                                                                                         Europe             33%
                                                                                                                                                                                                    28%
    Total
                                               £0.9bn                         £0.4bn                                                                          14%
    operating profit

    Adjusted                                                                                                     International              41%                                                     39%
                                               £1.3bn                         £0.5bn                                                                          33%
    operating profit

    Adjusted
                                                17.6%                         17.3%                                                                                                                     JV
    operating margin

1
  Reported results of the GSK Consumer Healthcare JV prepared under IFRS, excluding certain items, and adjusted for perimeter changes related to the planned divestment of Horlicks and other
consumer nutrition brands to Unilever.
2
  Reported revenue and assumed Adjusted operating profit for the perimeter of the business contributed to the new JV prepared under US GAAP in USD and translated into £GBP at the average 2017              22
exchange rate of 1.30 $:£.
GSK uses a number of adjusted, non-IFRS, measures to report the performance of its business, as described in GSK’s Q3 2018 results, including Adjusted operating profit which excludes certain items.
Financial information relating to Pfizer is presented on a similar basis.
Path to separation

Enhances financial flexibility and          New consumer healthcare
investment capacity                         company

Presents a clear pathway forward for GSK    Targeting investment grade balance sheet

Creates a new global Pharmaceuticals and    Leverage of 3.5-4.0x net debt/Adjusted
vaccines company                            EBITDA at point of separation
and
                                            Target payout ratio in the range of 30-50% of
New world-leading Consumer Healthcare       Adjusted earnings
company

Each with a balance sheet and capital
structure appropriate to its requirements

                                                                                            23
A clear pathway for improved performance across
both businesses

   Unique opportunity to accelerate our IPT
                                                New global Pharmaceuticals
                  priorities                     and Vaccines company with
                                                  R&D focused on science of the
                                                  immune system, genetics and
  Supports capital planning and investment in        advanced technologies
                  the pipeline

    Investment for future growth to benefit
    patients, consumers and shareholders        New world-leading Consumer
                                                  Healthcare company with
                                                category leading power brands and
  Clear pathway to creation of two UK based          science based innovation
              global companies

                                                                                    24
Q&A
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